Thursday, 14 December 2017

A LEGAL CHALLENGE TO EMERA CONTRACTS NEXT?

Guest Post by David Vardy

SUPREME COURT OF CANADA: NL VS. NS ON
CONTRACTUAL INEQUITY

The “Good Faith” Argument

Finally, the Supreme Court of Canada (SCC) is
hearing the argument that the Churchill Falls contract is inequitable. The SCC
hearing began on December 5, 2017. This is an appeal to a decision of the
Supreme Court of Quebec, which was in turn an appeal of a decision rendered by
Judge Joel Silcoff on July 24, 2014. CFLCo had sought the following declaration
(Silcoff, p. 2):

CFLCo lost in both tribunals and are now asking the
SCC to overturn the decision of the Quebec courts. Their position is that the
profits enjoyed by Hydro Quebec were unforeseen in 1969 and Hydro Quebec has a
duty to renegotiate. Lawyers for the Churchill Falls Corporation (CFLCo) argued
that Hydro Quebec has not acted “in good faith”.

CFLCo is basing its case in part on the fact that
Quebec civil law recognizes that “long-term, interdependent, collaborative
contracts contain implicit good faith duties of loyalty and collaboration that
require parties to adjust and adapt over the long life of the contract to
maintain the contract’s relevance for both parties. (Appellant’s
Factum before the SCC, p.4).” In framing its case before the SCC CFLCo
is arguing that there is a concept of partnership in play which calls for the
SCC to make a judgement as to whether the sharing of the profits from Churchill Falls is fair and equitable. Whether the SCC accepts this argument remains to
be seen.

David Vardy

Renegotiating with Nova Scotia

This poses the question as to whether we will soon
be heading back to the SCC once again to seek redress on our agreements with
Nova Scotia, which have become unbalanced in their favour? We will
not be able to invoke the Quebec civil code, as we have with Hydro Quebec but
we may have another, better card to play.

Lawyers for CFLCo have been searching in vain in
the power contract and other documents for a statement of the intended sharing
arrangements, to deal with unforeseeable events which have arisen over a 65
year contract. In the case of our agreements with Nova Scotia concerning the
Maritime Link we do have such a statement, embodied in the Term Sheet, signed
by the parties. Does this place us in a stronger position to deal
with inequities, in the event we have to go to court with Nova Scotia?

The deal with Nova Scotia was announced November
18, 2010, based on the “20 for 20” principle and enshrined in the famous Term
Sheet announced by Premiers Danny Williams and Darrell Dexter. Before adding
the cost of capital financing, the Newfoundland and Labrador share of the
project was valued at $5 billion, while the Nova Scotian component, the
Maritime Link, was valued at $1.2 billion, or 20% of the cost, for a total of
$6.2 billion. When financing costs are added the NL component alone was
estimated at $6.2 billion and the Maritime Link was estimated at $1.4 billion
for a total of $7.6 billion. The “20 for 20” principle set out in the Term
Sheet provides for Emera to absorb 20% of the capital investment for 20% of the
power from Muskrat Falls.

In exchange for building the Maritime Link, and
allowing Nalcor Energy to export power at no transmission cost over the Link,
Emera was to receive 20% of the power for 35 years. This represented a
commitment of 980 GWh annually, at no energy charge. At the end of 35 years the
Link was to be transferred to Nalcor. On top of this Nalcor was to supply 240
GWh of “supplemental” power each year for five years. The “Nova Scotia block”
was therefore 1,220 GWh for five years and then 980 GWh each year for 30 years.
This will begin in 2020, three years later than originally planned.

This Nova Scotia block was intended to enable Nova
Scotia to decommission some of its coal plants and to comply with federal
emission standards. This was accepted as “green power” coming from Muskrat
Falls. Nova Scotia’s participation was essential to make the project “regional”
in scope and therefore secure the federal loan guarantee for the full project.

The Role of the UARB

The Term Sheet contained a catch. The Utilities and
Review Board (UARB) of Nova Scotia had to approve this deal before it was
accepted. This was a smart move for Nova Scotia. In this province there was no
similar role mandated in the Term Sheet for the Public Utilities Board. Indeed,
the project was exempted from the jurisdiction of the PUB.

When the UARB ruled on this Term Sheet in July of
2012 they turned thumbs down on the deal. They wanted more power at spot market
prices, then estimated at five cents per KWh and rising to nine cents. The UARB
insisted on a better deal and Nalcor capitulated, knowing that the federal loan
guarantee was on the line and that the province could not finance this project
without a federal guarantee. This capitulation took the form of an Energy
Access Agreement (EAA) under which Nalcor must supply a minimum of 1,200 GWh of
“market energy” over the period up to 2041, initially intended to cover 24
years.

To sweeten the deal Emera was allowed to acquire a
29% share of the Labrador Island Link, with a guaranteed rate of return linked
to rates allowed to other regulated utilities.

Emera had no equity share in the generation component,
nor was it required to share in cost overruns at the Muskrat Falls site.
Nalcor, on the other hand, was required to share in cost escalation on the
Maritime Link.

Where does this agreement now stand? The cost of
the Maritime Link has risen from $1.4 billion to $1.7 billion (including
financing costs) while the generation and transmission costs borne by NL have
risen from $6.2 billion to $12.7 billion (including financing costs). The
overall project costs have gone from $7.6 billion in 2010 to $14.4 billion.
Nova Scotia’s share is now 11.8%, and not 20%. This is due to the more extreme
cost escalation for the NL components, particularly at the generation site,
than that experienced by Nova Scotia in building the Maritime Link, which
remained within the escalation margin allowed by the UARB.

New sharing arrangements

Because of the Energy Access Agreement, demanded by
the UARB, the minimum energy commitment to Nova Scotia has risen by 1,200 GWh.
For the first five years Nova Scotia’s share of the energy output from Muskrat
Falls will be at least 2,420 GWh. Taking account of line losses the amount of
Muskrat Falls power delivered at Soldier’s Pond will be 4,600 GWh, below the
4,900 GWh average production for which the plant is rated. Further line losses
can be expected when this power is wheeled on to the Mainland but these will be
ignored for now. The share of the 4,600 GWh committed to Nova Scotia becomes
not 20% but 52.6% The 20% for 20% principle has gone out the window!

When first announced in November 2010, and again on
sanction in December 2012, it was clearly stated that Muskrat Falls was being
developed to meet the needs of NL, particularly the Island of Newfoundland. A
full 40% or 2,000 GWh was to be used at the outset. With reduced demand
projected it is likely that displacement of Holyrood will absorb only 1,500 GWh
or maybe much less, if demand collapses, due to doubling of power rates on the
Island.

Emera’s share of equity in the Labrador Island Link
has risen from 29% to 63%, expected to “true up” at 59%. This will be an
attractive return producing more revenues for Nova Scotia than intended.

What about the prospect of lucrative export
revenues? Can we count at least on the five cents per KWh (rising to nine
cents), which was the initial forecast presented to the UARB? Look at Nalcor’s
return on the export of 1,600 GWh of Recall power as reported in its 2016
Business and Financial Report, which yielded a mere $43.5 million, or 2.7 cents
per KWh! Wheeling fees accounted for about half of this amount or 1.3 cents. If
we sell the additional 1,200 GWh at this price it would yield only $32 million,
assuming no wheeling fees need to be paid.

We cannot impose an energy charge on the “Nova
Scotia block” which, for the first five years, amounts to 1,220 GWh. The 1,200
GWh in sales under the EAA will bring the total to 2,420 GWh. The EAA provides
for 1,200 GWh to 1,800 GWh, with 1,200 GWh as a minimum. If Nova Scotia buys
1,800 GWh then its share of energy will be 3,020 GWh or 66% of the total,
making it by far the principal beneficiary!

Impact of doubled power rates

If the doubling of power rates on the Island
creates a large scale substitution effect then Island demand will collapse, as
people substitute other forms of energy or redouble their energy efficiency.
Not only is demand for power likely to plummet but so will revenues from sales.
Does the agreement with Nova Scotia offer any solace? Not in the least.

In that event we will have 2,180 GWH (4,600 GWh
less 2,420 GWh) to sell elsewhere if Nova Scotia takes 1,200 GWh under the EAA
(rather than 1,800 GWh). If Nalcor sells the power to Mainland users other than
Nova Scotia then there will likely be wheeling fees to pay. Using the recent
experiences of Nalcor in marketing surplus Recall power as a guide and taking
the spot market price as 2.7 cents less wheeling fees in the amount of 50%,
produces a net yield of 1.3 cents per KWh. Based on this amount the export
revenues would be $31.5 million, yielding total export revenues in the order of
$63.5 million. In this scenario the $63.5 million would be the totality of the
revenue available to repay $800 million in incremental costs due to Muskrat
Falls.

This is less than half of the 2021 operating and
maintenance costs and certainly not enough to cover the additional $800 million
in revenue requirements triggered by Muskrat Falls. When faced with this
prospect what should we do? If a better deal cannot be renegotiated should we
simply renege and face the penalties? Under this scenario mothballing of the
assets may be the best option.

A Bargaining Chip?

What are our prospects of renegotiating? Are they
better than our chances of renegotiating the Churchill Falls contract using the
“Good faith” argument? Clearly there are benchmarks that can be invoked, going
back to the Term Sheet. The agreements with Nova Scotia, as currently
structured, do not align with the Term Sheet. We have abandoned the 20/20
principle. Instead, for less than 12% of the capital cost (compared with 20%
originally) Nova Scotia has access to as much as 66% of the energy. Instead of
29% equity in the Labrador Island Link Emera has 59%,
privatizing a large share of the transmission infrastructure in our province.

Why did we give away our bargaining position by
allowing Nova Scotia to insert the UARB into a critical bargaining role? Why
did we weaken our position by emasculating our own PUB? These will be questions
that those in charge will have to answer when they appear before the Muskrat
Falls Inquiry Commissioner.

When the province appears before the SCC to argue
that Emera should renegotiate we will have benchmarks in place, benchmarks
included in a Term Sheet announced by Premiers who quickly disappeared from the
scene. Will this Term Sheet empower us to argue that the intent of the
agreements was not to make Nova Scotia the principal beneficiary of the Muskrat
Falls project, assigning them at least 52% of the power and as much as 66%, for
less than 12% of the capital cost? Can we argue that the agreements can be
renounced for failing to align with the intended goals?

What seems abundantly clear is that these
agreements with Nova Scotia do not create the basis for a mutually beneficial
partnership.

Where is the strategy that will rescue us from the
mistakes we have made and direct our efforts toward more productive outcomes?
Nalcor is digging us further and further into a financial hole from which no
escape appears visible. Government has failed to prompt an informed debate in
the future of Muskrat Falls. Surely the Commission of Inquiry has a role to
play in seeking solutions to the fundamental flaws of Muskrat Falls, the flawed
water management agreement, our inability to recover costs, our disregard for
the dangers of the North Spur and our reckless agreements with Nova Scotia.

Would our “Good Faith” case with Quebec
be strengthened if we had a Term Sheet, like the one with Nova Scotia? Nova
Scotia is reaping all the benefits and has become the principal beneficiary
rather than NL, as was intended. Nova Scotia is positioned to have access to
all the power it can use and perhaps more besides, for export. Nova Scotia is
deriving numerous secondary economic benefits from low-cost energy, considerable
savings on fossil fuels, environmental benefits, and profit on selling whatever
surplus it cannot use. They have become the principal beneficiary, if not the
entire beneficiary.

The Term Sheet provides a framework for
renegotiating the agreement. The fundamental principle is that the allocation
of costs should equal the energy shares enjoyed by each party. Does this mean
that Nova Scotia’s contribution should be increased to at least 52% of the
cost?

Will we be in a better position when we appear on
the steps of the SCC yet once again? Will the Term Sheet convince the nine
Justices that the agreements with Nova Scotia do not comport with the original
intent and must be renegotiated or renounced?

85 comments:

There has been alot of discussion about Nalcor's risk management and the SNC report which was buried. I honestly believe that one of the primary mandates for the Commission should be to example what records all the entities had concerning the potential for cost growth on the project. This should include not only Nalcor (current remit) but should also include any documentation that the NL provincial government, NS provincial Government, Federal Government and Emera had which related to the robustness of the estimates prepared by Nalcor.

It would be niave to assume that each entity did not do a thorough independant check of Nalcor's estimates. This is especially true for Emera, who were investing Shareholders money in the Labrador Island Link.

The Commission TOR has to be extended to include a review of all documentation, not just that sits within Nalcor.

If Emera thought the estimates were low, their their public commentary and that provided to the UARB about the 20 for 20 principal would be purely fiction, and potentially fraud.

The people of this province have been gouged by our respective governments, and neigbouring provinces. Everyone has made out like bandits on MF, except for the Newfoundlanders who have to pay for it, and the Labradorians who endure the environmental impacts.

If there was any fraud committed on this project, the perpetrators should endure the legal consequences. The provincial government of NL, and Emera Newfoundland and Labrador can not be excluded from the Commission of Inquiry.

Oh my, David, you are still on our past when what we need is something to buoy our future.Sure the SCC decision will sort out some problems that have lingered through the decades, but will it save our asses for the coming storm of financial misery we have thrust upon us? If so, you fail to teas that strand out.UG makes a post about the power corridor yakker but no solution seems evident, even speculatively.So, I ask again, regardless of how we got to this state, WHAT ARE WE GOING TO DO ABOUT IT?And, yes, I am shouting.But nobody is listening.

This analysis is insightful and spells out the financial concessions made at the expense of NL ratepayers to charge ahead with MF at ANY cost. The results this analysis makes clear are crushing to NL. The stupidity of reaping a mere 1.3 cents Kwh in 2020 rivals the giveaway that the UC became. The difference is that MF was negotiated into this giveaway during planning and construction. History tilted the table away from NL in the sixties.

A critic must ask at this point what would motivate such self destructive negotiations to proceed with MF at any cost? This has been accomplished by and large in total secrecy. This points to either the monumental incompetence of the NL negotiators or something more sinister.

You correctly state " Surely the Commission of Inquiry has a role to play in seeking solutions to the fundamental flaws of Muskrat Falls, the flawed water management agreement, our inability to recover costs, our disregard for the dangers of the North Spur and our reckless agreements with Nova Scotia." The problem of course is that this inquiry does not have the mandate to explore the spur issues, the WMA issues have been struck from the record by the complicity of the PUB with dark forces and the stop/go question is off the table. The "would default be a better option" will never be probed.

The analysis is eye opening and the prescriptive remedies are well outlined but the inquiry as presently constituted will do none of these things. Will there be forceful political ACTION to bring about a meaningful review of the issues raised here or will this continue to stumble along in secrecy when the best case scenarios are now well outlined....and they are horrendous, or will someone, anyone challenge the undemocratic commandeering and destruction of the treasury and life and limb?

The problem of course is that all the signs point to fraud and corruption being the only logical answers to the secrecy, regulatory dismantling, information blackout, negotiating incompetence with Emera etc. Where is the champion who will rescue NL from feudal subjugation for generations under crushing energy costs or will making desperate and failing pleas to SCC for sixty years be your fate?

Asking the appropriate questions is important. Taking the courageous steps to bend the arc of history away from feudal subjugation back toward a transparent democracy is demanded by the troubling question posed. Without both understanding and ACTION now, away from an obviously political inquiry with an inadequate mandate to one empowered to ask the tough questions and step on the right toes nothing will change and many will suffer.

We have to stop blaming others for what we have done to ourselves. Our failure cannot be blamed on Nova Scotia. Our failure is a result of Nalcor and our Government failing to act in the best interests of the people they were supposed to serve - NLers. The key question that the Inquiry must answer is why did Nalcor and our Government burden NLers with enormous debt to built Muskrat Falls that in principle will serve the Nova Scotian people with very low cost power that will have an enormous subsidy paid for by NLers. The subsidy on MF power to Nova Scotia is many many times greater than the opportunity cost per Kwh from the Upper Churchill project to Quebec. It is incredible that our Government and Nalcor could agree to such long term agreements with Nova Scotia given our history on the Upper Churchill. Can the Public Inquiry please answer -Why? If the people of NL have a "good faith" case then it should be directed at Nalcor and our Government not Nova Scotia.

"Develop or perish" these are survival mode terms, even a rat will fight when cornered. Does that term as uttered by Joey mean develop at all cost or perish, or did it mean, or it seems to be now, develop at all cost and perish too. Rual nl disappearing, declining population, may be at the edge of bankruptcy, that seems like perishing to me as the average Joe. Don't want to sound like the grinch, but we need to have some understanding of where we are, how we got here, and where we are going. Based on the term develop or perish, that was the mentality that got us where we are with muskrat, it was going ahead come hell or high water, give ns what they want, give emera what they want, get the loan at all cost, get the 400 million the Harper wants us to sign off on minimal fish processing requirements, sign anything, get it at all cost, and engage contractors on a cost plus basis. When the government changed ball et al should have stopped muskrat and evaluated where we were, as a matter of fact that should have been his election promise, pause muskrat to evaluate. But, nope full speed ahead, dam the torpedoes, keep her going boys, gotta finish strong at all cost, or perish, or should that be perish too. Omg, what am I saying, is this reality or another bad dream...... Nay by, the government is good for it....remember the good faith clause....or is that missing too...uncle Ottawa will save us?????

I presume these well considered questions, when put to the Gov. of the day, the Board of Trade, the Federation of Municipalities, and MP Liberals all, has received the usual "Cannot comment while the issues are before the courts".

Now..."cannot comment...........before the courts", can some learned person or legal began inform us exactly when, where, and to whom, or those who think, or an excape from answering a question. A well over used excuse no doubt, and usually ill informed that uses this term. I guess similar to the term, I can't recall, and we all know that they are lying through their teeth, except the person saying it thinks we all believe him/her. Think normal liars as well as pathological liars use it all the time, when cornered.

Jack StewartGenerally we don't get good Government in Ontario. In good times it seems like we do because there's lots of money to go around that doesn't incur much debt. Sometimes it looks like we do because there is seemingly still money throw around, but that money is often borrowed and we voters tend to avoid thinking about that a lot because often someone else will have to pay it back - like our kids (and even then we just think about the "now"). Sometimes we actually know that we aren't getting good Government - like now - because the hugely incompetent McGinty and Wynne Governments are being exposed for what they have primarily shown us: a willingness to engage in any deceit to stay in power. Sure, you can glibly write that off to being what Politicans do but that still doesn't absolve us - the voters - from registering our disgust at the activities of the McGinty and Wynne Governments in particular. As to McGinty (who? some might ask), its instructive that even the Press is no longer interested in him. We are entering the flim-flam season when the Liberals will dredge up all manner of scary reasons why we should not vote for another Party come the next election and send us messages as to how well they have served the people of Ontario. The half-witted will believe them, the full witted will just laugh and quickly forget how to spell Liberal.

Good governance seems as far away as ever. The letter to editor today's Telegram from one T.E Bursey, about the unnecessary Inquiry, speaks volumes.

Whomever wants to rebut Bursey letter, can ask him to have a look at Alberta's wind energy bids;http://calgaryherald.com/business/energy/wind-power-auction-blows-old-renewable-energy-myths-out-of-the-water/wcm/84f37657-a3ad-4167-a456-552f0ec41186

T.E. seems not to understands that NL Hydro provides base energy, while relying on the prevalent Wind energy, say on the barrens of Burin, Avalon, Bonavista, etc.

It is amazing Robert. 500 MW, more than MF will produce with the WMA, for 1 billion. Alberta is getting the power in a 20 year deal for 3.7 cents. It will be online in 2019 well before the 60 cent and climbing MF power is online costing NL 13-15 billion.

"Because of the Energy Access Agreement, demanded by the UARB, the minimum energy commitment to Nova Scotia has risen by 1,200 GWh. For the first five years Nova Scotia’s share of the energy output from Muskrat Falls will be at least 2,420 GWh. Taking account of line losses the amount of Muskrat Falls power delivered at Soldier’s Pond will be 4,600 GWh, below the 4,900 GWh average production for which the plant is rated. Further line losses can be expected when this power is wheeled on to the Mainland but these will be ignored for now. The share of the 4,600 GWh committed to Nova Scotia becomes not 20% but 52.6% The 20% for 20% principle has gone out the window!"

The energy for the Energy Access Agreement is not contractually obligated to come from Muskrat Falls, is not included in the Nova Scotia Block, and is not included in the 20 for 20 principle. It will come from whatever units are on line at the time, including minimizing spill which is energy that has zero marginal cost to Hydro, and will be sold at market rates. Also, I can find no reference to the amount of energy that is considered as 'supplemental energy,' where does the 240GWH come from? Finally, the Energy and Capacity Agreement states that the energy totals to be delivered are less line losses where you have included losses. So the energy calculation for the Nova Scotia Block is from Muskrat Falls not at Soldiers Pond.

"The cost of the Maritime Link has risen from $1.4 billion to $1.7 billion (including financing costs) while the generation and transmission costs borne by NL have risen from $6.2 billion to $12.7 billion (including financing costs). The overall project costs have gone from $7.6 billion in 2010 to $14.4 billion. Nova Scotia’s share is now 11.8%, and not 20%."

In this argument you seem to have neglected the money that Emera has invested in the LIL, some $910m according to a government ATIP document I found.http://atipp-search.gov.nl.ca/public/atipp/requestdownload?id=5080

Your argument that the 20 for 20 principle is 'out the window' appears to be incorrect.

I seem to recall that early plans showed that the MF infeed would have a terminal at about Corner Brook with the power split, feeding east to St Johns and some feeding south to NS. If so, this got changed. All of MF power now is to come to Soldiers Pond near St Johns. The transmission losses I recall was data suggesting about 8 percent losses from MF to Soldiers pond. whereas 6 percent losses is suggested by Vardy. Why bypass the west coast with the DC line without a more direct MF feed to NS? The technical argument would be that there is less transmission losses on the export power, if we instead give NS our island hydro power, the distance being about 300 miles, whereas it is about 700 miles from MF to Soldier Pond. Then there is power reliability, which is usually proportional to the mile of transmission. Given the route of the Labrador infeed, the terrain, and distance, Labrador power is likely 4 to 5 times more unreliable. So NS opted for the present arrangement, all MF power terminates near St johns and NS ties in to our existing Nfld Grid, not direct from MF. One could say NS will get no power from MF, and all from our island power, although it is all interconnected. There may be rare occasions when MF power will exceed our island load , with some extra from MF. So we incur twice the transmission losses on our infeed as NS feed on the Maritime link, and we get much less reliability of power, a double wammy. And we can add one more..... As to the extra power to NS......you say coming from water we might spill.....or "from whatever units are online at the time".........it seems this can and would include oil fired power from Holyrood or other gas turbines in Nfld, and at a time when we have no water to spill, or may have a shortage of water, which seems likely this winter..... wound incur high cost Nfld thermal power going to NS. MF average power is about 500MW delivered to the island, that can replace Holyrood, but also the Maritime link is 500 Mw to NS. So we get unreliable , extremely high cost MF power and with higher transmission losses , and NS gets low cost more reliable power with lower line losses. To top things off, I beleive NS wanted the ability to use as hydro assets as an anchor for their wind generation........and we gave them that as well, as gravy, (Ed martin likes gravy) to the detriment of Nfld adding wind. Nalcor will argue that it all works out the same.........until the Labrodor infeed goes down...........and then questions will be asked while rotating outages are in effect here, in winter. The reliability issue has been confirmed by Liberty, saying we cannot therefore close Holyrood thermal plants. Sounds like Nalcor officials were employed by Emera, that they got a completely one sided deal. Dumb and Dumber , or what?

Emera is getting power from Granite Canal and fed to Bottom Brook---our contractual load is set and MF comes to Soldiers as a plausible replacement for Holyrood. This scenario is 1 of the 6-7 reasons I argued for complete to avoid default---at least if complete we 'might' have an avenue to argue not providing power to Emera.

I don't remember a convertor for MF at CB, but have only been here for 5yrs.

Either way, both you(in a bit more detail) and Anoy @ 12:55 are correct in your assessment of how the MF deal works and affects NLers.

There is another indignity to Nflders;If power use crashes locally , which is likely with high rates, the need for our thermal plants largely evaporates, allowing us to be near 100 percent green on our almost 1200Mw of island hydro. But with considerable island hydro going to NS, we are locked in to having the MF power as a substitute, now denied much of our paid in full island hydro assets. MF power comes via the Labrador underwater link. Emera had a part ownership in that, but more recently, a much larger ownership. On that power, feeding totally to Soldiers Pond Emera is entitled to some 8 percent profit. Almost like letting them have part ownership of the 3rd line from Bay d'Espoir,as middlemen and making profit from that. The whole scheme stinks.....screwing the Nfld ratepayer, to benefit NS Emera shareholders. It is tragic to make a one sided deal, selling out your province by one important misstep or error. But to do a deal making 4 or 5 major missteps takes true genius, worthy of the 6 million paid to Edmond Gravy Martin, who pulled it off, without hardly a whimper, by ratepayers or the media. The wool pulled over the eyes of the population, believing statements such as Jerome Kennedy in the House, predicting our energy export sales into New England would hit 1 dollar a kwh. And so, sugar plum danced in their heads,as MF sanction was near Xmas. Once upon a time there was a vision.........that became a nighmare. Will the Inquiry fill in all the blanks as to the great hoist? Or just more clever cover for the scallywags?Winston

The finer details is exactly why I have said before that LeBlanc should have a open mandate to examine this. I still think the inquiry needs to go back to the 70's assessment of the Anglo-Saxon route and how exactly this came to pass. LeBlanc need no direction, just a willingness to delve into the why...

Everybody recognizes the sexy issues of the Spur, mercury, bad wire etc but few see the longterm issue of what this arrangement really means to our populace.

However, we should accept now that no one will ever be punished, there is no way to alter the fact that the province will spend upwards of $15B and the young income earners (ie 20yr olds) will always be indebt.

Omg what a sad lagecy to leave to generations unborn and the next generations of 20 year olds, we as a people should hang our collective heads in shame. As for the perpetrators of this calossial tragedy I can't even think of what their fate should be. And do they have the ball gaull to appear in public and celebrate this greatest give away in the history of our people. I speak as an average Joe and as a shareholder of this so called world class energy complex called nalcor, that has placed the interest of other provinces and companies, and their personal interest and egos well above their shareholders. The last politican that came to my door seek a vote was during the CD election, and his selling line was if I would give my money to the oil companies supplying holyrood or to my own company. He talked about wars in the Middle East and that kind of Marley, and where the price of oil was going. I told him that there have been wars in the Middle East since the beginning of time, and what goes up must come down, and when the Americans stopped buying their oil, and sending barrels of dollars over there, in exchange for barrels of oil, the price would come down. As at that time the Americans were starting their fracking program and were predicting oil sufficiency in a few short years. So I told him where to go, and he would not get my vote for such a scheme as all they were trying to do was get one up on Quebec and satisfy their own collosial egos. And where else on earth do you get such a spare population with no heavy industry, that gets as much wind and rain as we do on this island. And that's where you get the few MW of power that we need not on an extension cord that runs 1300 kilometres through some of the rugest terrain and weathe conditions on earth. No I am not an engineer or an economist, I will leave that to tha WA and DV of this population, but at least they are not traitors and burden with egos that can destroy this province, and have done so. Nl hydro mandate is to supply the the most reliable and economic power to the requirements to the people of this province, and have been doing that very well, and now the nalcor bunch have put that all assunder, by selling out to ns, and emera especially, and their own collosial egos. So any shareholder like myself of nalcor or even a regular employee of nalcor should in any way try and defend nalcor and their actions, and ad if you do, you should hang your head in shame and volunteer to relocate to mud lake and take your chances there. Yes, everyone of them should not be in exile in Florida but in our very own mud lake. Amen....

Muskrat Falls was a solution looking for a problem. So, Winston, extending the HVDC lines to the Avalon does make sense if your intent is to replace Holyrood and that's where the primary load is located. In terms of TX losses, going to Soldiers Pond makes sense if that's your goal. Early on the Lower Churchill was supposed to be about export so maybe you're correct in saying that an early plan had the HVDC coming to the west coast only. I don't recall seeing that myself but that doesn't mean much of anything.

The length of the Labrador Island Link doesn't bother me too much. It's not unprecedented, e.g. the Pacifc HVDC Intertie is nearly 1400km long and rated for 3100MW. It accounts for nearly half of LA's peak capacity. The question is whether the LIL has been built to stand the conditions along it's route. That remains to be seen.

Yes, power to Nova Scotia will come from Holyrood until it is decommissioned, the CTs, island hydro but only if there is enough for NL native load. That's pretty clear in the contracts from what I've read. Depending on load and power flows, which units are online, Nova Scotia may get some actual electrons from MF but probably not many.

The Atlantic Link project is an interesting one to watch. Nalcor is involved for around 1TWh of MF energy and balancing services.

I don't see Holyrood being retained as backup as it is near end of life and would make a fairly lousy standby unit anyway due to slow startup. More likely that Hydro would install one or two more CTs like the new one at Holyrood to supplement imports from Maine/Maritimes. The Maritimes has some small amount of capacity available to provide as firm backup (up to 165MW if my math is right) while Quebec has essentially none in the winter, firm capacity anyway. I need to reread the reserve sharing and emergency supply agreements between Nalcor and Emera again to refresh my memory on those.

Liberty did suggest that backup power would be needed post interconnection but it didn't say it had to be Holyrood.

I don't look at the deal with Emera as harshly as some people. Nalcor secured transmission rights from Newfoundland all the way to the New England market at the Salisbury Hub and even down into Maine to go along with having the Maritime Link built by Emera.

I hope the inquiry exposes the blind arrogance of government and Nalcor in pushing through this project. I support hydro development, including on the Lower Churchill, but the way this project went down was astonishing to watch. If we can survive the short to medium term I think this project will be a benefit to us but right now the odds for surviving the short to medium term are pretty small. On top of that, I see the Finance Minister on whining that we don't get equalization. That tells me this government is not up to the task of solving our financial issues. I do take some small hope though when I see stories like the one about John Abbott overhauling the health care system.

Lol, 12:46, you didn't answer his question. He did not ask where you worked, he asked if you thought we were getting the best bang for our buck with muskrat or nalcor, as you claimed we are not in health care.

Regular readers may recall UG piece on our health care system, Choosing Wisely. The doctor promoting this, which is a national program well needed, suggested on CBC TV that 20 percent, 600 million could be cut from our health care here. Johns Abbott says hundreds of millions.....so nearly enough waste and fat and inefficiency to offset the boondoggle MF yearly losses. But downloading to communities etc, if well planned and and wisely done, may have good results with lower costs. But our healthcare now is as bad as Nalcor....with incompetence and secrecy and inefficiency.......Abbott has his hands full to to want is needed.......and what changes have we seen with Nalcor under Marshall, some improvement, but still much of the same culture as before.....even Liberty remarked on the Nalcor culture issue. And UG suggested that patients be called to verify appointments for Cat and MRI scans.......almost a year later, this has still not been implemented! So, is a new CEO for Eastern health a first step by Abbott?PF

LOL! Oops. I completely misread that. No, no we’re not. I originally supported the project though worried about the costs rising. Politicians have no business making these types of decisions and while a long advocate of public power almost wish Hydro was privatized just to take it out of the hands of politicians.

A recent case in point.....my daughter arrives for an Xray. Upon arrival, She is told that it cannot proceed because her doctor did not sign the requisition. Now one would think this should have been caught in advance, or even on the spot, a phone call to her doctor, and a electronic signature or email or fax say. But no, the patient is sent home with instructions to again see her doctor and get the form signed and forwarded for an appointment later.(Imagine if the patient is from Nain) This is I suggest, run of the mill stuff. And so the machine sits idle for half an hour, the technician takes a coffee break etc, and the patient's diagnosis is delayed, and she has the expense of another trip later ......2 trips, one for the family doctor , another back to the hospital. Like a make work project, well like MF, but high cost medical staff and equipment sitting idle. PF

Anon at 13.03 ---what is urgently needed is an overall of this province's energy strategy/plan (including the replacement of the legislation that gives Nalcor a monopoly that strangles our economic development and prevents ratepayers' and businesses' from developing, installing, utilizing, supplying, selling etc. energy in any manner that makes economic, safe and environmental sense).

Agree there is waste and inefficiencies in all aspects of society, including our health care, as in the examples cited, but muskrat boondoggle is in a catagory all of it's own, by it's sheer size. I hate to say it but to try and compare the two, is really penny wise and pound foolish. It is not even like comparing apples with oranges, more like comparing elephants with mice. If we had built our largest hospital, say the health science cent, on ramea, or fogo island then than could be compared to a similar boondoggle in healt care as muskrat. We have got to get our heads around this 15,000,000,000 $ boondoggle and what to do about it. It is the equivalent of the total Net debt accumulated by the province in the past 70 years or so, or since confederation, that would include all the waste in government, health care, roads, fish plants, education, you name it, etc. And that's my story, and I'm sticking with it.

PENG2 concurs that the "Finer details" of the long term impact of the arrangements of this Muskrat scheme will be for our province is important......the impact on worse power reliability, etc., (being separate from other issues that get much attention). But does the co-counsel have sufficient engineering experience in power systems to lead an expose' of the multiple flaws, false assumptions and bad and incompetent decisions taken? And if so, does judge Leblanc have the ability to grasp the complexity of the challenges of the Anglo Saxon Route, to conclude that only insanity or stupidity would permit sanction .....and show where, and by who insanity or stupidity (or maybe fraud) ruled the day for the decisions. Apart from Family law, what experience or judicial decisions qualified him for such a monumental task?

And as to Anom @ 10:03 Yes going to Soldiers Pond makes sense to replace Holyrood, but robust energy efficiency for customers, wind, and more island hydro made 10 times more economic sense, I suggest. The length of the DC line does not bother you.......but the terrain is one of the worst in the world, as reliability bothers both me and Liberty. That Holyrood will get decommissioned:I agree, the old units are near reliable end of life, but the concept put to the public was shutting down Holyrood. Holyrood has a huge HV 230 KV plus 69 kv terminal station, this to remain. The huge building and maintenance of the structure .....must remain. One of the 3 large generators must remain operational as a synchronous condenser for voltage support....must remain. The other two old units may get upgraded with new gas turbines. This likely 500 million in cost, so about 10 percent added to power bills for this. Existing dock and storage tanks.......may be needed for diesel fuel for the gas turbines? If so, that too remains. Holyrood does not close down, but 2 old units and the steam feed system and stacks will have no use. Perhaps 25 percent of Holrood overall facility will be decommissioned. And even that following a lenghty period, 5 years or more to prove MF reliable, otherwise needed for backup, New GT go in before old units decommissioned. As to imports from NS......I understand about 150 or so MW available from NB to import to NS, but as NS needs more that that, there is no surplus to feed to Nfld in an emergency......with a cold snap in NS and Nfld we would be in a pickle. As to the deal with Emera, which you see little problem with........seems like a highway to nowhere, as long as shale gas supplied power at 2 cents per kwh to the USA Hope the Gull Island gets much more scrutiny that MF....and that competent engineers speak up instead of hiding behind a keyboard, 5 years after sanction, with reservations and concerns how all this MF came about. Vardy at MUN this week expressed how most all on this blog seem afraid to give their name, and asks why.Cheers, and you too have a good day anom. Look forward to when you are not restrained and anonymous, as you appear knowledgeable about our power system.There are obviously good engineers at Nfld Hydro who are silenced.Winston Adams

Response to comments on Emera agreements Anonymous at 12:55Thank you for your questions. The fourth “whereas” clause in the 2010 Term Sheet provides for Emera to receive 20% of the output of the Muskrat Falls plant, “in exchange for an investment in the Maritime Link”. The equity investment in the Labrador Island Link was a benefit to Emera in the form of “investment opportunities” in exchange for Emera’s provision of “transmission services in NB and NE”. The equity investment in the Maritime Link was not included in the calculation of the 20% investment in the Maritime Link.

Definition 1 (b) of the 2010 Term Sheet makes this explicit and also refers to Appendix D:

The Nova Scotia Block is defined as follows in 1(jj) under Definitions in the Term Sheet, and includes “supplemental energy”. You are correct that transmission losses must be taken out of the 980 GWh to calculate net energy to Emera.

The UARB decision MO5419 dated July 22, 2013 provides more precise numbers in paragraph 31: The expected service life of the Maritime Link facilities is 50 years. NSPML will own 100% of the Maritime Link facilities for the first 35 years. After 35 years, ownership of the Maritime Link facilities will transfer to Nalcor. The terms of the agreement with Nalcor provide that Nalcor will supply NSPML with an additional block of electrical energy in the first five years of operation of the Maritime Link to compensate for this 15 year differential. This additional electrical energy is approximately 240 GWh per year and is known as Supplemental Energy (“Supplemental Energy”). Although the Supplemental Energy will be available during the winter months, it will not be available during the peak load hours in those monthsIn my post I referred to 4.6 TWh available at Soldier’s Pond. This information was supplied by Nalcor and indicates expected line losses of 300 GWh or about 6% from the generation site to St. John’s. The line losses to Nova Scotia were expected to be higher, about 8%, as indicated in 7 (b) of the Term Sheet or 78 GWh. Article 2 (j) of Appendix D of the 2010 Term Sheet allows Emera to earn a rate of return commensurate with that allowed to Newfoundland Power:

Emera’s equity in the LIL is now $800 million based on Nalcor’s Sources and Uses Update of August 2017. This represents about 63% of the equity in the LIL and not 29% as originally intended. This equity participation was never included in the “20% for 20%” calculation, nor have I included it. I have certainly not ignored it in my post. Thanks again for your interest in my post.David Vardy

I made an error in my first paragraph above. This will correct it.Thank you for your questions. The fourth “whereas” clause in the 2010 Term Sheet provides for Emera to receive 20% of the output of the Muskrat Falls plant, “in exchange for an investment in the Maritime Link”. The equity investment in the Labrador Island Link was a benefit to Emera in the form of “investment opportunities” in exchange for Emera’s provision of “transmission services in NB and NE”. The equity investment in the LIL was not included in the calculation of the 20% investment in the Maritime Link.

The DC infeed from Labrador has a peak capacity of about 900MW leaving, while avg out put from MF about 560MW. Arriving at Soldiers pond is the amount leaving less transmission line losses. Whether operating on average or peak load the transmission line losses would vary, being a higher percentage at peak. Perhaps this is the difference in 6 percent and 8 percent that I seem to estimate. Perhaps a Nalcor engineer could verify.

Thank you for your reply, Mr. Vardy. Paragraph 27 of the referenced 2013 UARB document provides a different definition of the 20 for 20 principle. If my reading is correct and I will admit I have not had time to fully digest this document, the equity investment in the LIL should be included and supplemental energy should not.

"The basic premise underlying the Nalcor Transactions is that NSPML will pay 20% of the LCP Phase 1 and the Maritime Link facilities’ estimated total capital and operating costs in exchange for 20% of the estimated energy and capacity from Muskrat Falls (the “20 for 20 Principle”). This 20% of the energy and capacity has a duration of 35 years and, when combined with the five year Supplemental Energy (described later), is called the Nova Scotia Block (“NS Block”)."

Perhaps this is a change in def'n from the term sheet but if it is the case then the '20 for 20' principle appears intact.

Interesting article but the statement "Renewables diversify the generation mix; their variability can be predicted and they can provide valuable ancillary services critical to grid stability, such as frequency response and voltage control." should raise some questions. The only renewables that can provide ancillary services is hydro and geothermal as they have the proper control systems to do so. Wind and solar certainly can't, not without storage and static var compensators, not yet anyway.

Also, the comment that ABs wind is 1/10th of Texas capacity is misleading as the Texas grid is 7-8 times the size of the AB system in terms of overall installed capacity. Texas has also spent billions added transmission to their grid in order to connect all that wind energy which accounts for about 12% of their produced energy.

Where is the RFP to turn down Holyrood with a bunch of wind farms? Maybe Beothuk should bring the global capital to Conception Bay, Bell Island, combined with iron mine geothermal. Lots of Renewable Energy options.

Robert,Pembina says remewable energy is ow the lowest cost of energy, even cheaper than natural gas. Wind in Alberta came in at 3.7 cents per kwh, and is spectacular. However, progressive power companies have adopted the position that Energy Efficiency by end users is actually a source of power, as it reduces energy waste, freeing up energy for other uses and also reduced transmission losses. Once that principle is accepted and adopted, then the issue is what end use of customers and measures is best and most cost effective to take advantage of this energy source. There are some 500 end uses. Most who practise this are achieving substantial savings from this source, with measures that run form 1 to 3 cents per kwh. So, even with 3.7 cent wind in Alberta, and 1.7 cent wind in Mexico, Energy Efficiency is still the best and lowest cost choice. And engineers or others dispute that?Winston Adams

So where is the Gov. directed moratorium on wasted electrical juice on baseboard heating? Think of all the low carbon building retrofits taking those overpriced, oversized single family, electric baseboard heated barns to 20th century heat-pump operations. There certainly are qualified M & E techies looking for the work. And there seems to be lots of stashed wealth, (Chase the ace, spend it in Florida or Vegas crowd), with the local gentry to pay for conversions. Think of the job creation in the highest unemployed province. NL needs to get back it purported imagination, we used to advertise as our cultural genetic asset

What you suggest, is what other jurisdictions are doing,including the job creation component for skilled trades people. Ont now giving incentives up to 20,000.00 for residential HPs....Nfld is doing none of this. They do the opposite......new schools with insufficient efficiency component, that merely saves a little energy in the shoulder seasons, but no demand reduction capability in the cold winter months. Makes as much sense as MFsDumb and dumber reigns supreme......to try and prop up demand for MFs, as if the elasticity rules cited by Vardy will not somehow kick in ......that it will be immune..... Name one MHA here, with insight, who can speak to this stupitity ..... WA

Robert, you can’t replace Holyrood with wind. Wind simply doesn’t have the firm capacity without being grossly overbuilt nor does it have the ability to control frequency and voltage as required to maintain system stability.

Robert said to "turn down Holyrood" with wind, not replace it. Holyrood on average in winter is operating at 350 MW, and occassionally higher during cold snaps.We now have 54 MW of wind operating at 43 percent capacity, only about 3 percent of our peak demand in winter.Some jurisdiction achieve 30 percent via wind, suggesting 30% of 1700MW is 510 MW of wind, and if 43 % capacity, suggests 219Mw of wind on average. So, this gives 62 % on average of Holyrood generation in winter replaced by wind. With wind storage, batteries or pumped, even more oil burning reduction could be achieved. Of course one would ramp up wind from our 3 percent to 10, 15 etc, to achieve intergration experience. Nalcor (our Jerome , the 1 dollar per kwh man)proposed 1200MW of wind with battery storage, 600 Mw on the east coast and 600MW on the west coast , if memory serves, a scheme so ridiculous and expensive, to discredit wind as a good asset for the Nfld grid, and silence critics of MFs. Of course ,if wind and energy efficncy were implemented together, than one could replace Holyrood generation in 8 or 10 years, these being ramped up. 10 years may seem long, but not longer than Mfs, and if started in 2012, we could be half way to closing Holyrood generation by now.But the Take Charge scallywags have a silly, deceptive and ineffective efficiency policy, by design, and helps protect Fortis shareholders and Nalcor MFs promoters. Perhaps PENG2 or other engineers could comment?Winston Adams

We have some capacity for storage for wind energy in our existing hydro reservoirs. Just watch and see if overnight energy purchases via the Maritime Link are made to ensure our reservoirs don't fall below critical levels. The arrival of ML completion is poised to save Nalcor's bacon and get us through this winter.

This could just have easily been another source though: wind. It seems logical that our existing wind infrastructure could be at least doubled or tripled before economic hurdles create a cutoff point. With hydro reservoirs that cutoff is being full and spilling water that could've generated power. We're a long ways from there this year and a few hundred extra GWH of wind, simultaneously reducing oil burn and topping of the reservoirs looks just too darn sensible. Too late for sense now though.

BTW - How much you wanna bet that 3.7 c/kwh wind ends up being cheaper than the cost of importing via the ML? We may never know the cost of those imports due to Nalcor+Emera shenanigans to obfuscate the true costs.

I’m an engineer with a background in testing wind farms and synchronous generators to model how they interact with the power system.

The maritime link is a game changer for wind here in NL. I suspect Nalcor will start building more or issue RFPs in the near future. Without the link our hydro units would end up spilling too much water before long though we could add a bit more before that happens. Before this we simply didn’t need the energy or capacity that wind generation could add and without a link to export energy over, why build it?

I don’t believe Holyrood could ramp fast enough to balance wind and that job would fall to the hydro units. Wind was not going to replace Holyrood capacity.

Some jurisdictions, eg Germany, do achieve higher penetration levels of wind, but they are interconnected and therefore have somewhere to balance their generation.

Jerome Kennedy is or rather was a politician so I give anything he might say little credit.

Anon 23:06 battery storage in concert with wind would not only permit much more of your world leading wind regime into the mix, it would be able to eliminate Hollyrood's functions. Shuttering Holyrood would save millions.

Wind plus battery storage now come in at 9 cents KwH. The price of both continues to fall. You need to reflect the current state of the art, not cling to the unreliable past determinations of wind without cost effective battery storage.

To engineer at@09:37You say the Maritime Link is a game changer for wind here and that Nalcor will soon issue RFPs . However I understand that Nalcor has assigned much of our possible wind capacity addition to Emera.....who are counting on this in their proposal for wind energy sales, and a transmission line to the USA. Please comment. Your rationale: Prior to MF sanction you suggest that more wind would result in spilling more water at times. But that we could have added a bit. Define a "bit". Manitoba Hydro Int said we could go to 10 percent or higher. This would be without storage of wind energy. Anon at 11:23 says wind with pumped storage would be cost effective, and Bruno promotes wind with battery storage, permitting system stability..... I agree with them , please comment. You say wind cannot ramp up fast enough, as to balancing, to replace Holyrood. The old units at Holyrood are slow to respond, but gas turbines respond quickly, when working along with with wind.And gas turbines will be the future for Holyrood for peaks or backup, the old units to be retired.....please comment. You are modeling wind farms with synchronous condensers for stability. Firms like GE, who also sell wind generators also model and do recommendations for max intergration of wind.........have companies like that been asked , before or since MF sanction as to what our grid might handle for wind, as part of isolated option, before MF sanction?Jerome Kennedy helped sway the House and the public.........where is Nalcor's or Hydro's data to counter foolish Kennedy?Winston Adams

Bruno, Winston, batteries are still in their infancy and I would not be willing as an engineer to install them in our isolated system, certainly not to any appreciable amount at this point. I would have installed the Maritime Link and distributed wind around the province first but still not to fully displace Holyrood. You don't like the legacy generation but we have decades of experience with it and know it works well. Batteries will get there eventually. In my experience the utility industry generally moves fairly slow to adopt new tech so as not to reduce reliability.

Pumped storage is a tried and true technology plus it has governor and voltage regulator controls so can control frequency and voltage to provide a stable system. The Sir Adam Beck PGS has been in service for 50 odd years. I did attend a session at an IEEE conference where new pumped storage facilities were discussed using variable frequency generators instead of synchronous gens. The idea being to improve efficiency as pumping is fairly inefficient in traditional pumped plants. I'd go pumped storage before batteries.

Winston, Nalcor has committed 1.09 TWH from Muskrat Falls to the Atlantic Link project while wind farms will be built in Nova Scotia and New Brunswick, unless that has changed since last I read anything on the project.

Hatch wrote a report for Hydro on how much wind could be added to the isolated system. They recommend a staged approach where 50MW is added every 5 years to a max of 300MW in 2035. That would all depend on load, available voltage support, etc. See the link https://muskratfalls.nalcorenergy.com/wp-content/uploads/2013/03/Hatch-Report-Wind-Integration-Study.pdf

I asked Nalcor if a similar study had been done for the post interconnection time and was told then that none had been completed. I suspect the amount of wind possible would be dictated by the size of the interconnections and available reserves to balance the wind.

Wind and gas turbines work well together but why add expensive, carbon spewing gas turbines to our system if we don't have too. The recent Alberta procurement of wind is ideal as it will offset the gas turbines used extensively in AB and reduce GHG emissions. The Holyrood site is ideal for adding gas turbines as the interconnection is already there. The Ontario Society of Prof Engineers wrote an excellent paper on integrating renewable energy such as wind and solar into an already low carbon grid such as one with nuclear or hydro. I'll have to dig for a link to that one.

I agree that pumped storage be preferable over batteries at present.If you mean the existing island hydro as legacy generation, I agree it is a very valuable asset.........Holyrood plant and old GT a big problem as to reliability and cost for fuel. I see added wind as secondary to customer energy efficiency as priority, to reduce the thermal generation, especially space heating loads. But wind can be added, but less if robust efficiency. If 2035 peak at say 2000 MW?, then 300 wind would be 15 percent.A present we have 3 percent. Another 50 in 2012 would have been only 6 percent .....so Hatch seems to have a very go slow approach....that suited Nalcor MF plan? Consultants are not immune from recommending what the customers wants to see, my opinion. Yes avoid gas turbine use as much as possible, and is why I advocate robust energy efficiency, rather than a failed Conservation plan. But gas turbines will be needed as backup, unless you have faith in MF reliability? I, Nor Liberty or many others have faith. Alberta climate is poor for cost effective air source hps to reduce winter space heating loads.......they would need typical 25,000.00 per house gnd source , as Ont now giving incentives of 20,000.00 per house. Our climate allows air source at one third the cost.........much better than fuel for gas turbines, do you agree? Holyrood is good and necessary for the old thermal plant, and has many assets that will be needed, but if starting fresh, with gas turbines , other locations would be better. The Jan 2013 outage was a result of salt flashovers there, and sustained for 6 hours , and cascaded to larger outages, do you agree? This unusual , but likely to repeat on 10 year average. Can you identify yourself an PENG3? Welcome to UG.Winston

Anon battery storage is robust, reliable, proven, cost effective and can have 100 MW in place in 100 days for 50 million. Being reactionary does not serve the debate.https://www.youtube.com/watch?v=T9nrdyix-hw

Bad news for you both. Nalcors plan outlined in horrific detail at the JRP called for 8 more gas turbines if memory serves me well. No plan for DSM is in the works just wasteful consumption, ridiculous and expensive fossil backup. Between your analysis and advice and the unfolding reality are oceans of bullshit from Nalcor. What will you do to move the reality to an affordable, reliable cost effective energy mix?

PENG3, if I can call you that.........Bruno, refers to Tesla 100MW battery/storage in Austalia.....that can feed back power for about a ere 1 hour, and only a fraction of that time for here for our heavy heating load. for a couple of thousand houses. Bruno thinks Musk is smarter than the original Tesla......not so. We have a century of advanced civilization from the results of Tesla, and power system, and communication improvement from Tesla, an unsung hero, a European immigrant to the USA. Bruno jumps around like a jack rabbit from different climates zones to try and make his point, as if that is applicable to Nfld in the same way. Bruno should not be on the committee to select the most cost effective technology, whether for generation or conservation.........until he stays focused on detail (he despises technobabble, yet treads where fools not dare enter). But he stirs the pot ( and maybe uses it) and keeps this blog lively. But there has been a lot of BS from Nalcor, official Nalcor, and Bruno could not do worse, and likely better, than the MF decision. And still no plan for DSM and wasteful consumption..........Bruno is right on that. Winston

Bruno, 100MW of batteries in a 45,000 MW System is negligible. The equivalent of adding a car battery to our grid. The only reason South Australia got into the trouble it did was it installed too much low inertia wind turbines without ensuring sufficient reserves.

Nalcor does have a plan to install more CTs as backup and reserve requirements dictate. Its prudent planning. Now as tech develops perhaps those CTs can be replaced with greener generators.

Winston, I recently finished this bio of Tesla. https://www.chapters.indigo.ca/en-ca/books/tesla-inventor-of-the-electrical/9780691165615-item.html?ikwid=Tesla&ikwsec=Home&ikwidx=0

There is BS everywhere including from people who think they have the grid solutions all figured out.

Hydro has piloted some load control programs for DSM but I haven’t heard the results of those studies.

Pilot DSM......Not sure if you mean minisplit report , and hot water tank control............if so they were both terrible, and ratepayers should have have not been accountable for the cost, as imprudent expenditure....my opinion. Perhaps you mean some other DSM pilots?

For Bruno....think of the grid in term of driving on the highway at 60MPH, and if you go 59.1 or 60.1 you stay on the road, your car is stable, but if you slow to 59.0 or faster to 61.0, you go off the road, the car goes unstable, and you are into the ditch or worse. That is tolerance of our power power grid, not MPH, but frequency of 60 cycles per second......you will see this stamped on motors etc , sometimes called 60 hertz, linked to the rotation of the generators. Now regulators by hydro can react quick to maintain that 60 hertz, and the huge rotors have a lot of mass to keep the speed constant, not so much with wind generators , or Holyrood thermal units with steam systems. CTs can respond quick . Electronic invertors can too, but used to have issues with harmonics, but much improved over the years. Big mass generators, if not generating, can be used to stabalize the power by virtue of their large inertia, and this is using them as synchronous condensers. One of Holyrood's large units can function this way, and 2 more added at Soldiers Pond for stability for the DC infeed link.

Technobable, Bruno......but essential to realize the limits of wind and batteries......which are making good advances......, so it is not just power , but also reliability and minimum outages. There is much protections schemes that keep the lights on, as in a fraction of a second it can all collapse due to electrical instability........if this helps you see why engineers are cautious about too much wind or battery storage.......but big strides are being made in some jurisdictions, where there is more interconnection.WInston

Winston you are being nasty and misrepresent my positions. Tesla is a visionary that changed the world. Musk also is. Lets decide in a century how he also changed the world. My only point was Tesla was only interested in theory and discovery, Musk is also a businessman, Tesla was not.

Anon you make my point when you admit the batteries overcome the capacity factor issue with wind. I suspect Musk will offer to build an integrated sun battery plan for Australia. No one suggested a 100 MW battery solved decades of bad POLICY. It quickly solved a crisis.

And Bruno, you miss my point entirely. I agree that batteries can help with wind integration. I disagree that battery storage is sufficiently mature that I would want to rely on them heavily in an isolated system. I haven't seen any studies or papers to suggest otherwise.

Winston, I was thinking of the water heater project actually, I had heard of it but hadn't look at it closely. Of course, the one advantage of baseboard heaters is that Hydro can drop the voltage by 5% when needed to save power as the power used by a heater drops with the square of voltage. If memory serves they save somewhere on the order of 50MW at peak.

Anon are you trolling me? You use circular arguments to condemn as not mature a new technology that you find no rear looking analysis of. Really?

What technical reason, apart from the ability for the instantaneous response of batteries to demand, is the problem? Musk set up a solar collector farm in a parking lot in a week at a Puerto Rico Hospital to fully power the hospital after Maria. Wind/battery, sun/battery are ideally mated and useful for isolated systems. It is the future of generation and distribution.

I'm not trolling you Bruno, I have better things to do with my time. What I'm saying is that there is a small amount of installed battery capacity versus even the amount of installed pumped storage or wind energy, for example, and therefore little experience with higher penetration levels. As an engineer I wouldn't want to risk the reliability of an isolated system by taking the lead on installing a large amount of battery capacity. Start small sure, get used to operating a system with gradually more installed, but that could take decades.

There are all sorts of studies and papers on integration of storage and wind, just none that tell me we could easily run the province on them or show other jurisdictions that have.

The technical reason I wouldn't roll out batteries and wind here in NL in any appreciable amount is we simply don't have the experience with high penetration levels yet. Also, it's not even clear that lithium batteries are up to the challenge, other chemistries and innovations will be needed for battery storage to work well in the long term.

Wrong Anon. Batteries are getting lighter and increasing energy density by 6% a year. If you were not defending a system with third world reliability and maintenance record it might be easier to believe you.

Micro grids can and will be rolled out, probably in third world countries. They will increase in size and demonstrate reliability.

After Nalcor goes belly up there will be opportunity for micro grids in NL to offer some relief to the survivors of the MF depopulation.

A century ago, power systems started out as what are now called microgrids. Small grids which could supply their own load and remain stable on their own. More and more systems interconnected to further improve reliability and take advantage of economies of scale. Along the way some areas lost the ability to remain stable on their own as imports were used and control systems no longer maintained frequency and voltage (wind generators among them), lo and behold along come microgrids to save the day. It’s a miracle!

I guess you missed the report on Dark NL and the Liberty and Manitoba assessments of the maintenance and reliability of NL Hydro.

Control systems have not improved since 1900, is that it? My how you cling to your rear view mirror and avoid any vision for the future. That fits perfectly with the Nalcor philosophy of only doing backward looking assessments of demand (unlike modern utilities).

Wind Power can easily be backed up not by batteries but Pumped Hydro systems which are common everywhere but in Canada. There are a number of sites in NL that could easily model the proposal for a similar system like in Marmora Ont. (around a continuous 600 MW for six hours) where by an open pit mine is used as a lower storage reservoir and a second higher one is built on the elevation just around the open pit. Buchans and Baie Verte are two other ideal sites for such a system as is Bell Island underground mines. Using open pit (and underground mines) as storage reservoirs for Pumped Hydro reservoirs hits two nails on the head with one blow. A huge storage capacity for wind generated peak power is available (all though caution-it is only about 80% efficient) and the environmental damage caused by the likes of Muskrat Falls is avoided since these sites are already Brown sites in environmental terms. The existing hydro dams on the island could easily be modified to create pumped hydro systems as follows. There was a proposal in Belgium several years ago to build an offshore lagoon and use excess wind power to pump the water out creating a kind of “hole” in the ocean. When there was a demand for electricity the water flows back into the lagoon and the pumps would be reversed allowing them to become generators (this is essentially how a pumped hydro works). Such a lagoon system could be built on the deeper existing hydro reservoirs enabling the water in a system to be used twice and avoiding excess environmental damage. The following links can explain it all a bit better.

What do you mean by synchronization here? If you mean connect to the grid at the same average frequency as other generators then pumped storage can do that. The Sir Adam Beck PGS, presently the only operating pumped storage in Canada, has been connected synchronously for 50 years.

Texas has spent billions on extra transmission so that they can move excess wind power around the state as batteries are up and coming but aren't there yet.

PENG3, I think Bruno confuses synchronous condenser with synchronization.......and technical details he calls technobabble.........but he does very good at times , so cut him some slack if a misstep, my approach....until he gets saucy....which is fairly often.....with sign of mellowing, maybe.

I try to teach him the Man's prayer: We are men, We can change , Maybe. ......as members of the possum club.Winston

Peng2 , and others who think Judge Leblanc and co counsel are equipped to handle this inquiry...... Look at todays :The Guardian : News , sports and opinion from the Guardain's US edition. On the upper left below the piece.... Trump - Russia, is a piece titles :I've heard of it. This is about the Trump nominee as a judge, Peterson, being questioned by republican senator John Kennedy, himself a lawyer. Petersen is stumped on basic law, being unable to answer a single question. The exchange was referred to as a "shellacking ' The principles in the questions are fundamental , essential knowledge for the job. Kennedy says he was just doing his job. Now imagine Judge Leblanc or co counsel being questioned as to their expertise to handle this monumental inquiry here. What does either know of the scope , the rationale, the complexity etc of the Muskrat scheme to get at the root cause of why all this came down? If the Barry Inquiry was 3 million this inquiry could go 10-20 million, and 80 percent to lawyers here, perhaps many already profiting from Nalcor or government work. Go to the bottom of the Guardain page and see the actual 2 minute video of the exchange,,,,,priceless. Petersen appears something like Gil Bennett, the cable guy, engineer largely responsible for this F... Up.

Can you picture Gil Bennett, reply : My background was not in power systems or dam construction, or HV transmision systems , whether AC or DC, nor in flood control, nor in Water Management Agreements, nor in methyl mercury effects, nor alternatives like DSM, Energy Efficiency etc.........., and Ed Martin, with answers likewise. We need questioning to expose the rot and incompetence.......is this inquiry up to the task? Doubtful. Almost certainly not. Maybe that is why they were chosen, just more politics to protect the guilty.PF

From memory, You mentioned in a comment that there was plenty on Google of Judge Leblanc's record. One might assume you saw plenty there and gave you assurance. I saw little but came across one item this week that made me uncomfortable as to his bias.PF

I am not from Nfld, but I cannot but feel sympathy, considering the plight brought on by your ‘Intellectually superior elite’, which I view as a cautionary tale for our age. So here are few disjointed comments:Commercial contracts are first and foremost tools to allocate risks. I understand that 'ordinary' Newfoundlanders long for partnership and sharing type contracts for resource development and consider grossly unfair, if not out rightly devious, any contract ending up clearly favouring the non-Nfld party. It is understandable; these are your resources.Contracts which share major risks among parties are possible, but they usually cannot be negotiated after the facts, when the risks have revealed themselves. To use a crude analogy, it would be like renegotiating a dice game after the toss. Who would want to play with you? Construction costs are one of the major risks of a large energy generating project. If one wishes to share it with the purchaser with no limiting cap (which is not a frequent arrangement), one faces two obstacles: said purchaser will naturally want a say in managing the construction, if not complete control and the economics of the purchase will appear less favorable and he may ask for a lower price. So if you want to keep full control, you usually have to bear the resulting risks. This brings us to another matter, the dangers of letting politicians decide upon these risks as if they were ‘captains of industry’. In the private sector, shareholders are exposed to so called ‘moral hazard’. It stems from the effect of some executive pay incentive schemes on their risk taking behavior. Simply put, if the worst fate for an executive is to be fired, but he can be handsomely rewarded if he makes the firm huge gains, this may lead to excessive risk taking behavior with the shareholders ultimately left holding the bag. That a shareholder can always sell his shares or even try to oust the executive roster,is not considered sufficient remedy as it can come too late. Since time immemorial,a whole battery of solutions has been applied with various success as counterbalance: ‘independent’ boards oversight with members legally liable, independent auditors, outside regulations such as on options trading in the banking sector etc.. With government interventions in the economy growing, buoyed by each new economic crisis, the same moral hazard problem is now raging in the public sphere. Setting aside the real possibility for his own (or his friend’s) financial gains, a politician’s reward is power and glory. So what is the worst if he fails? Voted out of office maybe ? While, if his wild gambles succeed, he may become a hero to his people !Where is the counterbalance to this incentive scheme? Face election? Absolutely, but it can come too late. A free press? Surely in some cases, but the ‘social activism issues’ favored by the press, their lack of economic expertise and/or their ideological bias against the private sector as taught to them in school, is such that there is hardly a government foray in the economics sphere they do not like, at least initially. Regulatory boards? Not a sure way as they can be ‘bought off’, but still much better than nothing. When the Nfld government decided to remove the Muskrat project decision from the purview of the Publics Utility Board this should have raised as many alarm bells as a private company getting rid of its board. But it did not. So what else? An independent committee of ‘wise and learned men’? Universities used to have those before becoming financially dependent on governments and before they envisioned their main contribution to public life as being the fostering of uncompromising ‘political correctness’.So, for the time being, we are left with the lonely courageous voices of the like of Uncle Gnarley. This being said, after you go after Nova Scotia, I hope you go after your own decision making ‘bastards’(excuse my French), so that the next ones will reflect a bit on all this. Live long and prosper !

Has anyone any doubt that the line over the Long Range will fail?really?Mid winter line work up behind Parson's Pond won't happen overnight, then we will need Holyrood and a whole lot more, assuming that we can't cut off the Maritime link and redirect for our own use.Personally, I pray for line failures this winter, before the juice flows, maybe that will alert them to the foolishness they have foisted on us.Although I doubt they will learn or make any effort to remediate the future.

https://goo.gl/T9wBHQ https://goo.gl/W6y4tR Due to the non-stop construction of the Nalcor Hydro Dam and without particularly liking what I have to say I must nevertheless do my best - as a matter of the greatest urgency - to shut down the boondoggle Nalcor Hydro dam Muskrat Falls project [Gull Island, Grand River Mishtashipu] Newfoundland and Labrador, Canada:

1. The Labrador Land Protectors, Partners and Supporters need to realize that shutting down the Nalcor hydro dam juggernaut via the “Public Inquiry,” “expert advice” “technical data” route is now most likely a complete waste of time because the Inquiry’s terms of reference are deliberately too narrow excluding health, safety, environmental criteria and because one Labrador Land Protector “expert” justifying North Spur instability, ‘embedded contractors’ rates of pay, risk of flooding or whatever can easily be countered by another Government “expert” at every stage of proceedings.

2. The Labrador Land Protectors, Partners and Supporters now need to fight on a battleground of their own choosing and not allow provincial and federal governments to shamefully continue developing their own.

3. The governments are large bureaucracies which should now be frightened into changing course by the Labrador Land Protectors, Partners and Supporters.

4. More rapid, direct action is now badly needed e.g. sadly, the more people who are sent to jail the better it is for our cause because government will not be able to deal with the huge public outcry and bad publicity.

5. Making sure that enough members in both NL and Canadian Parliaments are actively fighting ‘tooth and nail’ for our cause.

6. Vote for new candidates at next elections for both parliaments who will sincerely and actively support our cause by their deeds and words.

7. Anything other than Direct Action and Parliamentary Legislation Pathways is going to be a complete waste of time because of the $billions including federal loan guarantees supporting the project.

8. The Governments of Canada, Newfoundland and Labrador will simply keep on trying to steamroller all opposition since they have the mentality of a balance sheet. They will be quite prepared to go right through with the boondoggle, ruin people’s lives, cause whole community displacements then turn round and unashamedly claim they were right it in the end because the financial returns generated by their hydro power scheme made it so worthwhile!

9. Almost paradoxically, new Parliamentary Legislation by both Governments is quickly needed to stop the juggernaut dead in its tracks.

10. https://goo.gl/aG72xn Beatrice Hunter can have the same spiritual influence for Canada in the fight to #ShutMuskratDown as Mahatma Gandhi had for Indian political life. [Beatrice Hunter Video 24.12.17]

About Des Sullivan

Uncle Gnarley is written by Des Sullivan, of St. John's.
He is a businessman engaged in real estate, retail and development companies.
A Director of Sullivan Capital Corporation, he is a former Executive Assistant to Premier's Frank D. Moores (1975-1979)and Brian Peckford (1979-1985).
He also served as a Part-Time Board Member on the Canada-Newfoundland Labrador Offshore Petroleum Board (C-NLOPB).
Uncle Gnarley permitted the use of his highly regarded name provided he could have full access to state his own rather unequivocable opinions. (A more detailed Profile of Uncle Gnarley is described in the very first Post entitled "Uncle Gnarley is alive and well" found on this site.
Sullivan is a firm advocate of sound fiscal management by the provincial government and intends to use this Site as a forum for commentary on the major issues of the day. Says Sullivan, "Newfoundland and Labrador inspires debate on a variety of issues, a veritable Muskrat Falls of opinion".
Readers are invited to leave their opinions, too.
Uncle Gnarley will post every Monday, and more often as events warrant.